The Generation Y Effect

Within the next 10 years, Generation Y will be your shop’s largest consumer demographic. They will also be driving less, buying fewer vehicles, and, quite possibly, completely altering the way the industry does business. All the aspects that make Generation Y (those currently 19–31 years in age) stand out from its predecessors—a focus on technology, the environment, social connectivity, etc.—are driving these would-be customers away from the auto industry, says Joe Vitale, global automotive sector leader for business consulting, advisory and research firm Deloitte.

“This generation views ownership of a vehicle not as a necessity, but as a distraction,” he says. “All of these factors suggest that ownership of a vehicle for Generation Y is less desirable than it was for previous generations.”

That doesn’t mean that repairers should concede defeat. Instead, many suggest a shift to appeal to three key areas of interest for Generation Y: hybrid repairs, electronic technologies and customer service.

The Numbers

According to a Deloitte study, Generation Y will be the largest car-buying group in the country within the next decade. At 80 million strong, the group is expected to make up 40 percent of vehicle purchases in the U.S. by 2023.

Howard Tullman has founded several companies that provide services to the automotive industry, including vehicle valuation information company CCC Information Services Inc. He says Generation Y does not have the emotional connection to cars compared to past generations. They value vehicle ownership much less because of more difficult and costly maintenance needs, rising insurance premiums and loss of social connectivity while driving. In addition, it’s become politically incorrect to regard vehicles as a statement of their identities

Gen Y
Car-Buying Habits

71 percent of Generation Y consumers believe the environment is an extremely important factor when purchasing a new vehicle.

More than 50 percent of Generation Y is willing to pay more money for vehicles that are environmentally friendly or help save money on energy costs.

Generation Y is willing to pay up to $3,000 more for vehicles with additional technology bundles, and $2,000 more for vehicles with additional safety bundles.

More than 52 percent of Generation Y will never consider purchasing a certain vehicle brand again after a bad experience with a dealer.

Only 2 percent of Generation Y prefers to own a purely electric vehicle.

Source: Deloitte

Tullman says driving has diminished over the last 10 years by 23 percent, while biking and walking have increased by 122 percent and 37 percent, respectively.

Tullman says fewer people are obtaining their driver’s licenses, too. The average age for acquiring a driver’s license has increased from 16.5 to 23 in the last decade. Meanwhile, more than 30 percent of 19-year-olds and 25 percent of the entire Generation Y demographic do not have driver’s licenses.

The dealer’s advantage

Auto dealers will alter their strategies in order to promote more sales among this group, which will also impact independent repairers, Tullman says. Vehicle sales will be based on convenience because Generation Y wants vehicle ownership to be as easy and financially predictable as possible.

Auto dealers will offer more bundled packages along with vehicle sales to make car ownership more appealing—packages that include all maintenance needs, Tullman says. That will make the costs associated with vehicle ownership much more predictable and less burdensome for Generation Y consumers. Those prepaid maintenance bundles could connect consumers with dealerships for longer periods of time.

“Consumers will be more inclined to go to a dealer,” Vitale says. “If the dealers are able to provide high levels of service, trust and authenticity, there could definitely be downward pressure on independent repair shops.”

The independent solution

This doesn’t signal a doomsday for independent repairers, but it does mean that shops will need to begin focusing more heavily on hybrid repairs, electronic technologies and customer service.

Vehicles that do get purchased by Generation Y will be heavily equipped with the latest technological advances. Vitale says Generation Y prefers vehicles that include the newest safety systems, collision avoidance systems and Internet-based capabilities. And due to Generation Y’s environmental concerns, roughly 60 percent of them prefer vehicles with hybrid powertrains.

“We believe that this generation could be the tipping point in which we see a mass adoption of electrified vehicles,” Vitale says, noting it’s critical for every repair shop to be trained on proper repair and service for those models.

Vitale says impeccable customer service will be more essential than ever for shops to attract members of Generation Y to their business. Generation Y has a higher standard for customer service compared with other age groups. In fact, Vitale says the purchasing experience is three times more important to Generation Y than the actual product being purchased when selecting where to do business.

“Generation Y associates the service they receive with the brand. If [Generation Y] customers don’t get the experience they wanted, they won’t ever go back to that repair shop again,” Vitale says. “Repair shops that recognize that trend will have much more loyal customers,” a valuable benefit to maintain revenue amidst reduced repair volume.